Financial Statements Audit Report  
Washington Counties Risk Pool  
Thurston County  
For the period October 1, 2015 through September 30, 2017  
Published May 7, 2018  
Report No. 1021231  
Office of the Washington State Auditor  
Pat McCarthy  
May 7, 2018  
Board of Directors  
Washington Counties Risk Pool  
Tumwater, Washington  
Report on Financial Statements  
Please find attached our report on the Washington Counties Risk Pool’s financial statements.  
We are issuing this report in order to provide information on the Program’s financial condition.  
Sincerely,  
Pat McCarthy  
State Auditor  
Olympia, WA  
Insurance Building, P.O. Box 40021 Olympia, Washington 98504-0021 (360) 902-0370 Pat.McCarthy@sao.wa.gov  
TABLE OF CONTENTS  
Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance  
and Other Matters Based on an Audit of Financial Statements Performed in Accordance with  
Government Auditing Standards..................................................................................................... 4  
Independent Auditor's Report on Financial Statements.................................................................. 7  
Financial Section........................................................................................................................... 10  
About the State Auditor's Office................................................................................................... 44  
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Washington State Auditor's Office  
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INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL  
OVER FINANCIAL REPORTING AND ON COMPLIANCE AND  
OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL  
STATEMENTS PERFORMED IN ACCORDANCE WITH  
GOVERNMENT AUDITING STANDARDS  
Washington Counties Risk Pool  
Thurston County  
October 1, 2015 through September 30, 2017  
Board of Directors  
Washington Counties Risk Pool  
Tumwater, Washington  
We have audited, in accordance with auditing standards generally accepted in the United States of  
America and the standards applicable to financial audits contained in Government Auditing  
Standards, issued by the Comptroller General of the United States, the financial statements of the  
Washington Counties Risk Pool, Thurston County, Washington, as of and for the years ended  
September 30, 2017 and 2016, and the related notes to the financial statements, which collectively  
comprise the Program’s basic financial statements, and have issued our report thereon dated  
May 2, 2018.  
INTERNAL CONTROL OVER FINANCIAL REPORTING  
In planning and performing our audits of the financial statements, we considered the Program’s  
internal control over financial reporting (internal control) to determine the audit procedures that  
are appropriate in the circumstances for the purpose of expressing our opinion on the financial  
statements, but not for the purpose of expressing an opinion on the effectiveness of the Program’s  
internal control. Accordingly, we do not express an opinion on the effectiveness of the Program’s  
internal control.  
A deficiency in internal control exists when the design or operation of a control does not allow  
management or employees, in the normal course of performing their assigned functions, to prevent,  
or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a  
combination of deficiencies, in internal control such that there is a reasonable possibility that a  
material misstatement of the Program's financial statements will not be prevented, or detected and  
corrected on a timely basis. A significant deficiency is a deficiency, or a combination of  
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Washington State Auditor's Office  
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deficiencies, in internal control that is less severe than a material weakness, yet important enough  
to merit attention by those charged with governance.  
Our consideration of internal control was for the limited purpose described in the first paragraph  
of this section and was not designed to identify all deficiencies in internal control that might be  
material weaknesses or significant deficiencies. Given these limitations, during our audit we did  
not identify any deficiencies in internal control that we consider to be material weaknesses.  
However, material weaknesses may exist that have not been identified.  
COMPLIANCE AND OTHER MATTERS  
As part of obtaining reasonable assurance about whether the Program’s financial statements are  
free from material misstatement, we performed tests of the Program’s compliance with certain  
provisions of laws, regulations, contracts and grant agreements, noncompliance with which could  
have a direct and material effect on the determination of financial statement amounts. However,  
providing an opinion on compliance with those provisions was not an objective of our audit, and  
accordingly, we do not express such an opinion.  
The results of our tests disclosed no instances of noncompliance or other matters that are required  
to be reported under Government Auditing Standards.  
PURPOSE OF THIS REPORT  
The purpose of this report is solely to describe the scope of our testing of internal control and  
compliance and the results of that testing, and not to provide an opinion on the effectiveness of the  
Program’s internal control or on compliance. This report is an integral part of an audit performed  
in accordance with Government Auditing Standards in considering the Program’s internal control  
and compliance. Accordingly, this communication is not suitable for any other purpose. However,  
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Washington State Auditor's Office  
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this report is a matter of public record and its distribution is not limited. It also serves to  
disseminate information to the public as a reporting tool to help citizens assess government  
operations.  
Pat McCarthy  
State Auditor  
Olympia, WA  
May 2, 2018  
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Washington State Auditor's Office  
Page 6  
INDEPENDENT AUDITOR’S REPORT ON  
FINANCIAL STATEMENTS  
Washington Counties Risk Pool  
Thurston County  
October 1, 2015 through September 30, 2017  
Board of Directors  
Washington Counties Risk Pool  
Tumwater, Washington  
REPORT ON THE FINANCIAL STATEMENTS  
We have audited the accompanying financial statements of the Washington Counties Risk Pool,  
Thurston County, Washington, as of and for the years ended September 30, 2017 and 2016, and  
the related notes to the financial statements, which collectively comprise the Program’s basic  
financial statements as listed on page 10.  
Management’s Responsibility for the Financial Statements  
Management is responsible for the preparation and fair presentation of these financial statements  
in accordance with accounting principles generally accepted in the United States of America; this  
includes the design, implementation, and maintenance of internal control relevant to the  
preparation and fair presentation of financial statements that are free from material misstatement,  
whether due to fraud or error.  
Auditor’s Responsibility  
Our responsibility is to express opinions on these financial statements based on our audits. We  
conducted our audits in accordance with auditing standards generally accepted in the United States  
of America and the standards applicable to financial audits contained in Government Auditing  
Standards, issued by the Comptroller General of the United States. Those standards require that  
we plan and perform the audit to obtain reasonable assurance about whether the financial  
statements are free from material misstatement.  
An audit involves performing procedures to obtain audit evidence about the amounts and  
disclosures in the financial statements. The procedures selected depend on the auditor’s judgment,  
including the assessment of the risks of material misstatement of the financial statements, whether  
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Washington State Auditor's Office  
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due to fraud or error. In making those risk assessments, the auditor considers internal control  
relevant to the Program’s preparation and fair presentation of the financial statements in order to  
design audit procedures that are appropriate in the circumstances, but not for the purpose of  
expressing an opinion on the effectiveness of the Program’s internal control. Accordingly, we  
express no such opinion. An audit also includes evaluating the appropriateness of accounting  
policies used and the reasonableness of significant accounting estimates made by management, as  
well as evaluating the overall presentation of the financial statements.  
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis  
for our audit opinions.  
Opinion  
In our opinion, the financial statements referred to above present fairly, in all material respects,  
the financial position of the Washington Counties Risk Pool, as of September 30, 2017 and 2016,  
and the changes in financial position and cash flows thereof for the years then ended in accordance  
with accounting principles generally accepted in the United States of America.  
Other Matters  
Required Supplementary Information  
Accounting principles generally accepted in the United States of America require that the  
management’s discussion and analysis and required supplementary information listed on page 10  
be presented to supplement the basic financial statements. Such information, although not a part  
of the basic financial statements, is required by the Governmental Accounting Standards Board  
who considers it to be an essential part of financial reporting for placing the basic financial  
statements in an appropriate operational, economic or historical context. We have applied certain  
limited procedures to the required supplementary information in accordance with auditing  
standards generally accepted in the United States of America, which consisted of inquiries of  
management about the methods of preparing the information and comparing the information for  
consistency with management’s responses to our inquiries, the basic financial statements, and  
other knowledge we obtained during our audit of the basic financial statements. We do not express  
an opinion or provide any assurance on the information because the limited procedures do not  
provide us with sufficient evidence to express an opinion or provide any assurance.  
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Washington State Auditor's Office  
Page 8  
Supplementary and Other Information  
Our audit was conducted for the purpose of forming opinions on the financial statements that  
collectively comprise the Program’s basic financial statements as a whole.  
The List of  
Participating Members and Department of Enterprise Services Schedule of Expenses are presented  
for purposes of additional analysis and are not a required part of the basic financial statements.  
Such information has not been subjected to the auditing procedures applied in the audit of the basic  
financial statements and, accordingly, we do not express an opinion or provide any assurance on it.  
OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING  
STANDARDS  
In accordance with Government Auditing Standards, we have also issued our report dated May 2,  
2018 on our consideration of the Program’s internal control over financial reporting and on our  
tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements  
and other matters. The purpose of that report is to describe the scope of our testing of internal  
control over financial reporting and compliance and the results of that testing, and not to provide  
an opinion on internal control over financial reporting or on compliance. That report is an integral  
part of an audit performed in accordance with Government Auditing Standards in considering the  
Program’s internal control over financial reporting and compliance.  
Pat McCarthy  
State Auditor  
Olympia, WA  
May 2, 2018  
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Washington State Auditor's Office  
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FINANCIAL SECTION  
Washington Counties Risk Pool  
Thurston County  
October 1, 2015 through September 30, 2017  
REQUIRED SUPPLEMENTARY INFORMATION  
Management’s Discussion and Analysis – 2017 and 2016  
BASIC FINANCIAL STATEMENTS  
Statement of Net Position – 2017 and 2016  
Statement of Revenues, Expenses and Changes in Net Position – 2017 and 2016  
Statement of Cash Flows – 2017 and 2016  
Notes to Financial Statements – 2017 and 2016  
REQUIRED SUPPLEMENTARY INFORMATION  
Schedule of Proportionate Share of Net Pension Liability – PERS 1 – 2017 and 2016  
Schedule of Proportionate Share of Net Pension Liability – PERS 2/3 – 2017 and 2016  
Schedule of Employer Contributions – PERS 1 – 2017 and 2016  
Schedule of Employer Contributions – PERS 2/3 – 2017 and 2016  
Ten-Year Claims Development Information – 2017 and 2016  
Notes to Required Supplemental Information – 2017 and 2016  
SUPPLEMENTARY AND OTHER INFORMATION  
List of Participating Members – 2017 and 2016  
DES Schedule of Expenses – 2017 and 2016  
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Washington State Auditor's Office  
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WASHINGTON COUNTIES RISK POOL  
2558 R.W. Johnson Road SW, Suite 106  
Tumwater, WA 98512-6103  
Created by Counties for Counties  
Management’s Discussion &Analysis  
The Washington Counties Risk Pool (WCRP) management provides this discussion and analysis for the Pool’s  
financial activities following the conclusion of its 29th Fiscal Year (FY), ending September 30, 2017. The information  
in this discussion and analysis should be considered in conjunction with that in the financial statements and  
accompanying notes to understand WCRP’s financial position.  
WCRP has no other component units for which it is financially accountable. It operates as an enterprise fund and uses  
the accrual accounting basis in accordance with the U.S. generally accepted accounting principles. This fund type is  
used for ‘business type activities’ that are intended to recover all or a significant portion of their costs through user  
fees and charges. Revenues are recognized when earned and expenses are recognized when incurred.  
WCRP’s operating revenues consist mostly of assessments paid by its member counties. Its operating expenses consist  
primarily of payments made to resolve liability claims, including allocated loss adjustment expenses, and for  
premiums for reinsurances and excess liability, property and cyber risk/security insurance policies acquired from  
superior-rated commercial carriers.  
Discussion of the Financial Statements:  
The basic financial statements are comprised of two components: the financial statements and the notes to those  
financial statements. WCRP’s three financial statements in a condensed format are presented hereafter with three-  
year comparative data.  
The Statement of Net Position presents information on an entity’s assets, liabilities, deferred outflows and deferred  
inflows at fiscal year-end with the difference between them reported as Net Position.  
Fiscal Years Ending  
09/30/2016  
COMPARATIVE STATEMENT OF  
NET POSITION  
09/30/2015  
$47,703,622  
1,089,480  
09/30/2017  
$45,808,233  
959,485  
Current Assets  
Capital Assets (Net)  
Total Assets  
$45,838,799  
1,011,091  
$48,793,102  
$46,849,889  
$46,767,717  
Total Deferred Outflows of Resources  
$63,610  
$134,538  
$102,393  
Current Liabilities  
Non-Current Liabilities  
Total Liabilities  
$17,455,251  
12,401,409  
$29,856,660  
$19,682,994  
9,315,965  
$18,184,510  
10,450,667  
$28,635,177  
$28,998,959  
Total Deferred Inflows of Resources  
$83,946  
$12,069  
$94,174  
Investment in Capital Assets  
$1,089,480  
$1,011,091  
$959,485  
Unrestricted Net Position  
17,826,626  
16,692,308  
17,181,274  
Total Net Position  
$18,916,106  
$17,973,399  
$18,140,759  
Analysis: The WCRP’s Net Position saw a year-over-year increase of $167,360 between year-end 2016 and year-  
end 2017.  
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Washington State Auditor's Office  
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The Statement of Revenues, Expenses and Changes in Net Position presents details of an entity’s revenues and  
expenses during a fiscal year that resulted in the reported Change in Net Position — an increase in net position is the  
result of revenues exceeding expenses, while a decrease in net position results when revenues are less than expenses.  
COMPARATIVE STATEMENT OF  
REVENUES, EXPENSES AND CHANGES  
IN NET POSITION  
FY-2015  
FY-2016  
FY-2017  
Operating Revenues  
Member MLC Assessments  
Member Cyber Assessments  
Member WCPP Assessments  
Operating Revenues – Miscellaneous  
Total Operating Revenues  
Non-Operating Revenues (and Expenses)  
Interest Income  
Other (Net) Non-Operating Revenues  
Total Non-Operating Revenues  
Total Revenues  
$10,276,349  
93,697  
2,782,175  
150,000  
$10,654,325  
126,005  
2,696,205  
150,000  
$11,301,412  
113,662  
2,729,335  
306,308  
$13,302,221  
$13,626,535  
$14,450,717  
$257,362  
26,857  
$284,219  
$13,586,440  
$340,586  
(21,252)  
$319,334  
$285,939  
(77,004)  
$208,935  
$13,945,869  
$14,659,652  
Operating Expenses  
Adjustments to (MLC) Claims/ULAE  
Reserves  
$4,539,223  
$4,536,127  
$5,205,180  
Premiums for MLC Insuring Policies  
Premium for Cyber Insurance Policy  
Premiums for Property Insurance Policies  
Depreciation, Bad Debt & Administrative  
Expenses  
3,821,325  
93,697  
2,681,290  
3,906,713  
126,005  
2,485,368  
4,405,630  
113,662  
2,614,484  
2,252,141  
3,834,364  
2,153,335  
,
Total Operating Expenses  
$13,387,676  
$14,888,577  
$14,492,291  
Changes in Net Position  
$198,765  
$19,369,171  
(651,830)  
$(942,707)  
$18,916,105  
$167,360  
$17,973,398  
Beginning Net Position (October 1st)  
Prior Period Adjustment  
Ending Net Position (September 30th)  
$18,916,106  
$17,973,398  
$18,140,758  
Analysis: An increase in revenues, including an increase in miscellaneous operating revenues, coupled with a decrease  
in total operating expenses, contributed toward the overall increase in net position.  
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Washington State Auditor's Office  
Page 12  
Budget Discussion:  
The WCRP Board of Directors approves the upcoming Fiscal Year budget at their Annual Meeting in July of each  
year. Budgeted revenues and expenses are identified based on information known at the time of budget approval, with  
the understanding that final premiums from reinsurers and excess insurers will be confirmed prior to the beginning of  
the upcoming Fiscal Year. Budget amendments are generally not required, and no amendments were requested during  
FY2017.  
Fiscal 2017 Budget  
Operating Revenues:  
2016 Actual  
$10,654,325  
2017 Budget  
2017 Actual  
Member C/A – Liability Coverage  
Member C/A – Property Insurance  
Member C/A – Cyber Insurance  
$11,301,412  
2,729,335  
113,662  
$11,301,412  
2,729,335  
113,662  
2,696,205  
126,005  
Other Operating Income  
150,000  
150,000  
306,308  
Total Operating Revenues  
$13,626,535  
$14,294,409  
$14,450,717  
Operating Expenses:  
Current Year “SIR” Claims Reserves  
Current Year’s “Corridor” Claims Reserves  
Premiums for Reinsurances Purchased  
Premiums for Excess Insurances Purchased  
Premiums for Property Insurance Purchased  
Premiums for Cyber Insurance Purchased  
Depreciation (of Capital Assets) Expense  
Administrative (OH) (with contingency)  
Total Operating Expenses  
$1,008,468  
3,450,000  
3,399,350  
507,363  
2,485,368  
126,005  
78,389  
3,755,978  
$14,810,921  
$1,083,493  
4,350,000  
3,791,751  
613,879  
2,614,484  
113,662  
76,593  
2,706,981  
$15,350,843  
$1,083,493  
4,350,000  
3,791,751  
613,879  
2,614,484  
113,662  
76,593  
2,076,742  
$14,720,604  
Operating Income / (Loss)  
$(1,184,386)  
$(1,056,434)  
$(269,887)  
Non-Operating Revenues / (Expenses):  
Interest Income  
$340,586  
38,137  
$300,000  
35,000  
$285,939  
34,767  
Rental Income (Net)  
Total Non-Operating Revenues / (Expenses)  
$378,723  
$335,000  
$320,706  
Changes in Net Position  
$(805,663)  
$(721,434)  
$50,819  
Net Position, Beginning of Fiscal Period  
$18,916,105  
$17,973,398  
$17,973,398  
NET POSITION, End of Fiscal Period  
$18,110,442  
$17,251,965  
$18,024,217  
Analysis: The actual amount expended for the 2017 Total Operating Expenses was lower than the amount budgeted.  
This was largely driven by the actual Administrative (OH) (with contingency) expenses ending at $630,377 less  
than budgeted.  
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Washington State Auditor's Office  
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Overall Analysis of Financial Position and Result of Operations:  
The WCRP’s financial position increased slightly, indicating a stable, if not upward trending financial condition.  
The WCRP continues to make concerted efforts to increase its fund balance, in anticipation of a change in the  
hardening of the commercial insurance market and in anticipation of increasing its Self-Insured Retention (SIR).  
Further, the Pool has spent the past few years financially positioning itself for utilizing funds to offset unexpected  
rate increases, which did occur for the 2016-17 Fiscal Year.  
The Pool continues to remain confident in its financial position, financial practices, claim handling, and in  
its investment strategy and performance. Appropriate reserve estimates were included within the Pool’s  
FY-2017 financials for any such matter stemming from liability claim against a member county. The WCRP  
anticipates continued success and favorable outcomes of cases currently pending.  
Finally, it should be noted that the WCRP’s assessments to its members have remained stable, an ongoing goal of  
the organization, while the unrestricted Net Position continues to meet the solvency requirements established by the  
State under Washington Administrative Code (WAC) 200-100, and continues to fall within the funding target  
established by the WCRP Board of Directors.  
Request for Information:  
This MD&A is provided for those interested in a general overview of the financial operations of the  
Washington Counties Risk Pool. Questions concerning the information provided and WCRP’s financial report, or  
requests for additional information, should be addressed to: WASHINGTON COUNTIES RISK POOL, Attn:  
Executive Director, 2558 R W Johnson Rd SW, Suite 106, Tumwater, WA, 98512-6103; or by telephone at (360)  
292-4500.  
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Washington State Auditor's Office  
Page 14  
MCAG NO. 0774  
WASHINGTON COUNTIES RISK POOL  
STATEMENT OF NET POSITION  
September 30, 2017 and 2016  
ASSETS  
As of  
9/30/2017  
As of  
9/30/2016  
CURRENT ASSETS:  
Cash and Cash Equivalents  
Investments  
$
10,059,410  
24,631,073  
$
4,896,133  
33,966,134  
Receivables:  
Members' MLC Deductibles Receivable  
Excess Insurance/Reinsurance Recoverable  
Members' MLC Assessments Receivable  
Members' Cyber Liability Receivable  
Members' WCPP Assessments Receivable  
Other Accounts Receivables  
2,066,795  
2,009,684  
4,161,352  
102,264  
2,612,728  
109,272  
51,965  
715,119  
178,909  
609,756  
13,115  
2,701,123  
131,482  
44,351  
Accrued Interest  
Prepaid Expenses  
3,690  
2,582,677  
TOTAL CURRENT ASSETS  
$
45,808,233  
$
45,838,799  
NONCURRENT ASSETS:  
Capital Assets (Net of Accumulated Depreciation)  
$
$
$
959,485  
959,485  
$
$
$
1,011,091  
1,011,091  
46,849,889  
TOTAL NON CURRENT ASSETS  
TOTAL ASSETS  
46,767,717  
TOTAL DEFERRED OUTFLOWS OF RESOURCES  
Deferred Outflows -- GASB 68  
$
109,957  
$
134,538  
LIABILITIES  
CURRENT LIABILITES:  
Claims Reserves:  
"SIR" Reserves  
Open Claims - SIR Reserves  
IBNR Reserve - SIR  
$
767,876  
$
1,177,614  
-
-
4,141,666  
-
219,305  
-
14,144,409  
-
-
"1st/2nd Layers' Corridor" Reserves  
Open Claims - Corridor Reserves  
IBNR Reserve - Corridor  
Accounts Payable  
Compensated Absences  
Unearned Revenue - Members Assessments  
2,001,585  
-
212,738  
7,000  
15,195,311  
TOTAL CURRENT LIABILITIES  
$
18,184,510  
$
19,682,994  
NON CURRENT LIABILITIES  
Claims Reserves:  
"SIR" Reserves  
Open Claims - SIR Reserves  
IBNR Reserve - SIR  
Open Claims - Corridor Reserves  
IBNR Reserve - Corridor  
"8x2 10% Quota Share" Reserve  
Reserve for ULAE  
$
1,551,156  
308,781  
3,226,502  
3,399,431  
100,000  
1,223,328  
68,795  
$
1,979,323  
65,544  
2,945,766  
2,163,980  
120,000  
1,116,000  
85,660  
Compensated Absences  
Net Pension Liability -- GASB 68  
572,674  
839,692  
TOTAL NON CURRENT LIABILITIES  
$
10,450,667  
$
9,315,965  
TOTAL LIABILITIES  
$
28,635,177  
$
28,998,959  
TOTAL DEFERRED INFLOWS OF RESOURCES  
Deferred Inflows on Pensions  
$
$
$
94,174  
$
$
$
12,069  
NET POSITION:  
Investment in Capital Assets  
Unrestricted Net Position  
959,485  
17,188,838  
1,011,091  
16,962,308  
TOTAL NET POSITION  
18,148,323  
17,973,399  
The accompanying notes are an integral part of this financial statements  
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Washington State Auditor's Office Page 15  
MCAG NO 0774  
WASHINGTON COUNTIES RISK POOL  
STATEMENT OF REVENUES, EXPENSES  
AND CHANGES IN FUND NET POSITION  
For the Fiscal Years Ended September 30, 2017 and 2016  
Year Ended  
9/30/2017  
Year Ended  
9/30/2016  
OPERATING REVENUES:  
Members' Assessments -- MLC Coverage  
Members' Assessments Cyber Coverage  
Members' Assessments -- WCPP Insurance  
Other Operating Revenues  
$
$
11,301,412  
113,662  
2,729,335  
156,308  
$
$
10,654,325  
126,005  
2,696,205  
-
Member Services - Revenues  
150,000  
150,000  
Total Operating Revenues  
$
14,450,717  
$
13,626,535  
OPERATING EXPENSES:  
Current Year's "SIR" Reserves  
$
1,083,493  
4,350,000  
13,889  
$
1,008,468  
3,450,000  
575,252  
(507,141)  
129,548  
(120,000)  
3,399,350  
507,363  
Current Year's "1st/2nd Layers' Corridor" Reserves  
Adjustment in Prior Years' "SIR" Reserves  
Adjustment to Prior Years' "1st/2nd Layers' Corridor" Reserves  
Adjustment in Reserve for ULAE  
Adjustment of Prior Year's 8x2 10% Quota Share" Reserve  
MLC Reinsurance Premiums  
Excess Liability Insurance Policies Premiums  
Cyber Premiums  
WCPP Insurance Premiums  
(329,529)  
107,328  
(20,000)  
3,791,751  
613,879  
113,662  
2,614,484  
76,593  
126,005  
2,485,368  
78,389  
Depreciation Expense  
Operating Expenses  
2,069,178  
3,755,975  
Total Operating Expenses  
$
14,484,727  
$
14,888,576  
OPERATING INCOME (LOSS)  
$
(34,011) $  
(1,262,041)  
NON OPERATING REVENUES (EXPENSES)  
Interest and Investment Income  
Rental Income  
Rental Expense  
Fair Value Adjustment on Investments  
Gain (Losses) on Capital Assets Disposition  
$
285,939  
39,889  
(5,122)  
(111,771)  
-
$
340,586  
38,137  
(6,380)  
(55,261)  
2,252  
Total Nonoperating Revenues (Expenses)  
CHANGES IN NET POSITION  
$
$
$
208,935  
174,924  
$
319,334  
(942,707)  
$
$
TOTAL NET POSITION, Beginning of Year  
17,973,398  
18,916,105  
TOTAL NET POSTION, End of Year  
$
18,148,322  
$
17,973,398  
The accompanying notes are an integral part of this financial statements  
___________________________________________________________________________________________________________________  
Washington State Auditor's Office Page 16  
WASHINGTON COUNTIES RISK POOL  
STATEMENT OF CASH FLOWS  
MCAG NO. 0774  
For the Fiscal Years Ended September 30, 2017 and 2016  
Year Ended  
9/30/2017  
Year Ended  
9/30/2016  
CASH FLOWS FROM OPERATING ACTIVITIES:  
Cash received from Members & Insurers  
Cash payments for goods and services  
Cash payments to employees for services  
$
$
8,789,028  
(12,071,889)  
(1,065,256)  
$
$
13,386,511  
(17,744,563)  
(1,364,026)  
Net Cash Provided (Used) by Operating Activities  
(4,348,116)  
(5,722,078)  
CASH FLOW FROM CAPITAL AND RELATED FINANCING ACTIVITIES:  
Purchase of Equipment & Building  
Cash from Rental of Office (net)  
Non Operating Miscellaneous Income  
$
$
(24,987)  
34,767  
-
$
$
-
31,757  
-
Net Cash Provided (Used) from Capital and Related Financing Activities  
9,780  
31,757  
CASH FLOW FROM INVESTING ACTIVITIES:  
Proceeds from Sale and Maturities of Investments  
Interest/Accrued Income  
(111,770)  
278,325  
(53,009)  
303,911  
$
$
$
$
Net Cash Provided (Used) by Investing Activities  
166,555  
250,902  
Increase (Decrease) in Cash and Cash Equivalents  
$
$
$
(4,171,782)  
38,862,266  
34,690,484  
$
$
$
(5,439,420)  
44,301,682  
38,862,262  
Cash and Cash Equivalents - Beginning of the Year  
Cash and Cash Equivalents (including restricted) - End of the Year  
The accompanying notes are an integral part of this financial statements  
Year Ended  
9/30/2017  
Year Ended  
9/30/2016  
RECONCILIATION OF OPERATING INCOME TO NET CASH  
PROVIDED (USED) BY OPERATING ACTIVITIES  
OPERATING INCOME  
$
(34,011)  
$
(1,262,041)  
Adjustments to Reconcile Net Operating Income to Net  
Cash provided (used) by Operating Activities:  
Depreciation Expense  
76,593  
(6,712,590)  
(594,668)  
(20,000)  
(623,893)  
107,328  
1,050,902  
(6,567)  
(160,332)  
(9,865)  
78,389  
(957,901)  
442,573  
(120,000)  
(2,169,925)  
129,548  
717,877  
(21,189)  
(142,805)  
163,413  
(2,580,017)  
(5,722,078)  
Decrease (Increase) in Accounts Receivable  
Increase (Decrease) in "SIR" Reserves  
Increase (Decrease) in "8x2 10% Quota Share" Reserve  
Increase (Decrease) in "1st/2nd Layers' Corridor" Reserves  
Increase (Decrease) in Reserve for ULAE  
Increase (Decrease) in Unearned Revenue  
Increase (Decrease) in Accounts Payable  
Increase (Decrease) in Pension Liability (Net)  
Increase (Decrease) in Accrued Liabilities  
Increase (Decrease) in Prepaid Expenses  
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES  
2,578,987  
(4,348,116)  
$
$
NONCASH INVESTING, CAPITAL, AND FINANCING ACTIVITIES  
The accompanying notes are an integral part of this financial statements  
___________________________________________________________________________________________________________________  
Washington State Auditor's Office Page 17  
October 1, 2016 Thru September 30, 2017  
These notes are an integral part of the accompanying financial statements.  
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
The accounting policies of the Washington Counties Risk Pool (“WCRP” or “the Pool”) conform to  
generally accepted accounting principles (“GAAP”). The Governmental Accounting Standards Board  
(GASB) is the accepted standard setting body for establishing governmental accounting and financial  
reporting principles. The significant accounting policies are described below.  
A.  
Reporting Entity  
The WCRP was created in August 1988 as an association of member counties independent of all  
other associations of which the counties are members. The Pool’s foundational agreement  
authorized its creation pursuant to Chapters 48.62 and 39.34 of the Revised Code of Washington  
(“RCW”).  
The WCRP is governed by its 26-member Board of Directors with a President, Vice-President,  
and Secretary/Treasurer serving as its annually elected officers. The WCRP Board meets three  
times each year at its Spring Conference & Board Meeting, Fall Conference & Board Meeting,  
and its Summer Annual Conference & Board Meeting. The WCRP’s Executive Committee,  
consisting of 11 members of the Board of Directors, meet four to six times each year for general  
Pool administration and oversight.  
Through the Executive Director, the Pool’s 12-member staff carries out of the mission and  
directives of the Board of Directors. The Administrative and Finance Department handles day-to-  
day operations and administration of the Pool, the six-member Claims Department manages all  
liability claims brought against member counties, and the Member Services Department,  
consisting of both Loss Control/Risk and Member Programs, provide the various training,  
consulting and other risk management and risk-reducing resources to participating members.  
Annual deposit assessments are adjusted to incorporate actuarial projections and operational  
needs, and then approved by the (WCRP) Board of Directors at their Annual Meeting. If the  
Pool’s assets were depleted, members would be responsible for outstanding liabilities of the  
WCRP.  
B.  
Basis of Accounting and Presentation  
The accounting records of the WCRP are maintained in accordance with methods prescribed by  
the State Auditor’s Office under the authority of Chapter 43.09, RCW. The WCRP also follows  
the accounting standards established by the Governmental Accounting Standards Board (GASB)  
Statement 10, Accounting And Financial Reporting For Risk Financing And Related Insurance  
Issues, as amended by GASB Statement 30, Risk Financing Omnibus, and GASB Statement 31,  
Accounting and Financial Reporting for Certain Investments and for External Investment Funds.  
The WCRP uses the full-accrual basis of accounting where revenues are recognized when earned  
and expenses are recognized when incurred. Capital asset purchases are capitalized, and long-  
term liabilities are accounted for within the financial statements.  
The principal operating revenues of the WCRP are member assessments, while its operating  
expenses include both claims paid from current year’s allowances and adjustments to prior year’s  
reserves, premiums for reinsurances and excess, property and cyber risk insurances, and the  
Pool’s administrative expenses.  
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Washington State Auditor's Office Page 18  
October 1, 2016 Thru September 30, 2017  
C.  
Assets, Liabilities and Net Position  
1.  
Cash and Cash Equivalents  
For the purposes of the Statement of Cash Flows, the WCRP considers all highly liquid  
investments with maturities of three months or less when purchased to be cash  
equivalent.  
2.  
3.  
Capital Assets and Depreciation  
See Note 6, Capital Assets  
Receivables  
Member Assessment receivables consist of amount due from members for the following  
year’s assessments. Amount owing from members and reinsurers for deductibles  
are also identified on the Statement of Net Position.  
Accrued Interest Receivable is the amount earned on investment at the end of the fiscal  
year.  
The WCRP Board of Directors, acting through its Executive Committee, decides if any  
accounts are deemed uncollectible. Uncollectible accounts are charged to expense in the  
period they are deemed uncollectible.  
4.  
5.  
Investments  
See Note 2, Deposits and Investments.  
Compensated Absences  
Compensated absences are absences for which the employees will be paid such as  
vacation and sick leave. The WCRP records accrued leave for compensated absences as  
an expense and liability when incurred.  
Annual Leave may be accumulated up to 30 days and is payable upon resignation,  
retirement, or death. An employee with more than sixty days sick leave accrued may  
convert the days earned in the previous year (less any sick leave days used in that year)  
to annual leave days at the rate of four days of sick leave for one day of annual leave.  
Sick leave may accumulate up to 130 days. Sick leave does not vest until death or  
retirement, and the accrued liability is booked at one-half of the amount earned.  
6.  
Unpaid Claim Liabilities  
The WCRP establishes claims liabilities based upon independent actuarial estimates of  
the ultimate losses (costs of claims), including future claims adjustment expenses for  
claims/lawsuits that have been reported but are not settled, and for claims that have been  
incurred but are not yet reported. The length of time for which such costs must be  
estimated varies depending on the coverage type involved. Estimated amounts of  
salvage and subrogation and reinsurance recoverable on unpaid claims are deducted from  
the liability for unpaid claims. Because actual claims costs depend on such complex  
factors as inflation and changes in doctrines of legal liability and in damage awards, the  
process used in computing claims liabilities does not necessarily result in an exact  
amount, particularly general liability coverage.  
___________________________________________________________________________________________________________________  
Washington State Auditor's Office Page 19  
October 1, 2016 Thru September 30, 2017  
Claims liabilities are actuarially recomputed and incorporate the Jury Verdict Value  
processes. The actuary uses a variety of techniques and formulas that reflect recent  
settlements, claims frequencies, and other economic and social factors to produce current  
estimates. A provision for inflation in the calculation of estimated future claims costs is  
implicit in the calculation because reliance is placed both on actual historical data that  
reflects past inflation and on other factors that are considered to be appropriate modifiers  
of past experience. Adjustments to claims liabilities are charged or credited to expense  
in the periods in which they are made.  
7.  
Reinsurance  
The WCRP acquires reinsurance (agreements) to directly reduce its exposure to large  
third-party liability losses and to indirectly reduce its (present and past) member  
counties’ exposures to contingent liabilities. Reinsurance permits recovery of substantial  
portions of the losses from commercial reinsurers, although it does not discharge the  
primary liability of the WCRP (and its member counties by contingent liabilities) as the  
direct insurer of the risks reinsured. The WCRP does not report reinsured risks as  
liabilities unless it is probable that those risks will not be covered by reinsurers.  
The cumulative to-date incurred loss amount deducted from claims liabilities as of  
September 30, 2017, and 2016 as being reinsured were $155,945,139 and $100,403,423  
respectively. Premiums ceded to reinsurers during 2017 and 2016 were $3,791,751 and  
$3,399,350 respectively. The independent actuary’s estimate for the ceded reinsured  
amount of gross loss reserves as of September 30, 2017, was $43,697,106.  
8.  
Member Assessments and Unearned Member Assessments  
Member assessments are collected in advance and recognized as revenue in the period  
for which the coverage is to be provided. On the balance sheet, member assessments  
receivables were billed on or about September 1st with up to the amount equivalent to  
105% of the prior year’s assessment being due by September 30th, and any remaining  
assessments balance(s) due by the following January 31st. The assessments calculated for  
liability coverage were based in substantial part upon the members’ prior year’s worker  
hours, upon the values of the real and personal properties scheduled by the participating  
counties for property coverage and simply equal shares for cyber risk coverage.  
Investment income is not presently considered for the determination of member  
assessments.  
9.  
Unpaid Claims  
Liability claims/lawsuits are charged to expenses as incurred. Claims reserves represent  
the accumulation of estimates for reported, unpaid liability claims plus a provision for  
liability claims incurred but not reported (IBNR). These estimates are continually  
reviewed and updated by WCRP’s consulting actuary and incorporate the Jury Verdict  
Value processes. Any resulting adjustments are reflected in current earnings.  
10.  
Reserve for Unallocated Loss Adjustment Expense  
The reserve for unallocated loss adjustment expenses (ULAE) represents the estimated  
cost to be incurred with respect to the settlement of both liability claims in process and  
those liability claims recognized as incurred but not reported (IBNR). WCRP’s  
independent actuary estimates these liabilities at the end of each fiscal year. The changes  
in these liabilities each year are reflected in current earnings.  
___________________________________________________________________________________________________________________  
Washington State Auditor's Office Page 20  
October 1, 2016 Thru September 30, 2017  
11.  
12.  
Exemption from Federal and State Taxes  
Pursuant to revenue ruling number 90-74, income of Municipal Risk Pools is excluded  
from gross income under IRC Section 115(1). RCW 48.62.151 exempts the WCRP from  
state insurance premium taxes and from business and occupation taxes imposed pursuant  
to Chapter 82.04 RCW.  
Pensions  
For purposes of measuring the net pension liability, deferred outflows of resources and  
deferred inflows of resources related to pensions, and pension expense, information  
about the fiduciary net position of all state sponsored pension plans and additions  
to/deductions from those plans’ fiduciary net position have been determined on the same  
basis as they are reported by the Washington State Department of Retirement Systems.  
For this purpose, benefit payments (including refunds of employee contributions) are  
recognized when due and payable in accordance with the benefit terms.  
NOTE 2 – DEPOSITS AND INVESTMENTS  
A
Deposits  
In accordance with RCW 39.58, WCRP deposits its funds into a public depository with collateral  
held in a multiple financial institution collateral pool administered by the Washington Public  
Deposit Protection Commission (PDPC). Funds are transferred between the WCRP’s public  
depository (depositories) and either the State Treasurer’s Local Government Investment Pool  
(LGIP); a US Bank custodial account; or the Spokane County Treasurer’s Spokane County  
Investment Pool (SCIP). There are no credit ratings for positions in external investment pools.  
WCRP funds on deposit as of September 30, 2017 and September 30, 2016 were as follows:  
9/30/2017  
9/30/2016  
Wells Fargo (checking)  
$ 10,059,410  
671,137  
7,756,576  
16,203,360  
$ 34,690,483  
$ 4,896,133  
665,899  
17,154,310  
16,145,925  
$ 38,862,267  
Washington State Investment Poo(LGIP)  
Spokane County Investment Pool(SCIP)  
US Bank Custodial Account  
Total deposits and investments  
___________________________________________________________________________________________________________________  
Washington State Auditor's Office Page 21  
October 1, 2016 Thru September 30, 2017  
B.  
Investments:  
2017 Concentration of Credit:  
Issuer:  
Cost  
Market  
Value  
Average  
Duration Maturity Moody/Sp  
Average  
Rating  
Percent of  
Portfolio  
Government of the  
United States  
$ 7,371,983 $ 7,372,759  
2.03  
2.09  
Aaa AA+  
45.50%  
Federal National  
Mortgage Assoc.  
Federal Home Loan  
Bank  
$ 3,304,359 $ 3,279,762  
$ 2,790,713 $ 2,766,865  
1.58  
1.48  
1.62  
1.51  
Aaa AA+  
Aaa AA+  
20.24%  
17.08%  
Federal Home Loan  
Mortgage Corp  
First American Govt  
Oblig Fund  
$ 2,775,392 $ 2,761,485  
1.39  
0.00  
1.42  
Aaa AA+  
17.04%  
.14%  
$
22,490  
$
22,490  
0.00 Aaa AAA+  
2016 Concentration of Credit:  
Issuer:  
Cost  
Market  
Value  
Average  
Duration Maturity Moody/Sp  
Average  
Rating  
Percent of  
Portfolio  
Government of the  
United States  
$ 7,466,878 $ 7,502,127  
1.23  
1.25  
Aaa AA+  
46.46%  
Federal National  
Mortgage Assoc.  
Federal Home Loan  
Bank  
$ 2,536,503 $ 2,543,408  
$ 2,522,486 $ 2,528,245  
1.97  
1.93  
2.01  
1.97  
Aaa AA+  
Aaa AA+  
15.75%  
15.66%  
Federal Home Loan  
Mortgage Corp  
First American Govt  
Oblig Fund  
$ 3,025,198 $ 3,037,370  
2.24  
0.00  
2.29  
Aaa AA+  
18.81%  
3.31%  
$
534,775  
$
534,775  
0.00 Aaa AAA+  
Investments Measured at Fair Value  
WCRP’s measures and reports investments at fair value using the valuation input hierarchy established by  
generally accepted accounting principles, as follows:  
Level 1: Quoted prices in active markets for identical assets or liabilities.  
Level 2: These are quoted market prices for similar assets or liabilities, quoted prices for identical  
or similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets  
that are not active, or other than quoted prices that are not observable;  
Level 3: Unobservable inputs for an asset or liability.  
___________________________________________________________________________________________________________________  
Washington State Auditor's Office Page 22  
October 1, 2016 Thru September 30, 2017  
At September 30, 2017 and 2016 WCRP had the following investments measured at fair value:  
Investments by Fair Value Level  
Spokane County Investment Pool  
U.S. Agencies  
09/30/2017  
Level 1  
Level 2  
Level 3  
$
7,756,576  
8,808,112  
7,372,759  
$
7,756,576  
8,808,112  
7,372,759  
U.S. Treasuries  
Total Investments measured at  
Fair Value  
$ 23,937,447  
$ 23,937,447  
Investments at Amortized Cost  
LGIP  
Money Market Fund  
Total Investments measured at  
Amortized Cost  
$
671,136  
22,490  
$
693,626  
Total Investments in Statement  
of Net Position  
$ 24,631,073  
Investments by Fair Value Level  
Spokane County Investment Pool  
U.S. Agencies  
09/30/2016  
$ 17,154,310  
8,109,023  
Level 1  
Level 2  
Level 3  
$ 17,154,310  
8,109,023  
7,502,127  
U.S. Treasuries  
7,502,127  
Total Investments measured at  
Fair Value  
$ 32,765,460  
$ 32,765,460  
Investments at Amortized Cost  
LGIP  
Money Market Fund  
Total Investments at Amortized Cost  
$665,899  
534,775  
1,200,674  
$
Total Investments in Statement  
of Net Position  
$ 33,966,134  
Disclosure of Custodial Credit Risk  
WCRP’s investment policy states that all security transactions shall be conducted on a delivery-versus-  
payment (DVP) basis. Securities purchased by the Pool will be delivered against payment and held in a  
custodial safekeeping account with the trust department of a bank. A third party custodian will be  
designated by the Executive Director and all transactions will be evidenced by safekeeping receipts.  
Concentration of Credit Risk  
Concentration Risk disclosure is required for all investments in any one issuer that represents 5% or more  
of the Pool’s total investments, excluding investment pools and investments issued by the U.S.  
government. No disclosure of concentration risk currently meets this requirement.  
Interest Rate Risk  
Interest rate risk is the risk that the portfolio value will fluctuate due to changes in the general level of  
interest rates. The Pool recognizes that, over time, longer-term portfolios have higher volatility of return.  
The Pool mitigates interest rate risk by providing adequate liquidity for short-term cash needs, and by  
making longer-term investments only with funds that are not needed for current cash flow purposes. The  
Pool has deposits of $7,756,576 with the Spokane County Investment Pool and $671,137 with the  
___________________________________________________________________________________________________________________  
Washington State Auditor's Office  
Page 23  
October 1, 2016 Thru September 30, 2017  
Washington State Investment Pool that are available immediately. The Pool further recognizes that certain  
types of securities will affect the interest rate risk profile of the portfolio differently in different interest rate  
environments. The Pool restricts callable securities to a maximum of 20% of the portfolio, restricts  
maximum maturity to 5 years, and constrains duration to plus or minus 20% of a market benchmark index  
selected by the Investment Committee based on the Pool’s investment objectives, constrains and risk  
tolerances.  
Investment in Local Government Investment Pool (LGIP)  
The Washington Counties Risk Pool is a participant in the Local Government Investment Pool (LGIP).  
The LGIP was authorized by Chapter 294, Laws of 1986 and is managed and operated by the Washington  
State Treasurer. The State Finance Committee is the administrator of the statue that created the pool and  
adopts rules. The State Treasurer is responsible for establishing the investment policy for the pool and  
reviews the policies annually and proposed changes are reviewed by the LGIP advisory Committee.  
Investments in the LGIP, a qualified external investment pool, are reported at amortized cost which  
approximates fair value. The LGIP is an unrated external investment pool. The pool’s portfolio is invested  
in a manner that meets the maturity, quality, diversification, and liquidity requirements set forth by the  
GASBS 79 for external investment pools that elect to measure, for financial reporting purposes,  
investments at amortized cost. The LGIP does not have any legally binding guarantees of share values.  
The LGIP does not impose liquidity fess or redemption gates on participant withdrawals.  
The Office of the State Treasurer prepares a stand-alone LGIP financial report. A copy of the report is  
available from the Office of the State Treasurer, PO Box 40200, Olympia, WA 98504-0200, online at  
http://www.tre.wa.gov.  
NOTE 3 – JOINT SELF-INSURED RETENTION  
WCRP retains complete responsibility for the payment of covered liability claims, both within its specified  
self-insured retention limits and that provided under its reinsurance contracts. The coverage provided  
under applicable excess insurance contracts is separately administered with assistance only from the  
WCRP. During the past three fiscal years, the Pool has not approved a settlement that exceeded the  
insurance coverage noted herein that is more specifically outlined in Note 5.  
For fiscal years 2017 and 2016, WCRP’s per-occurrence retention limits for liability claims were $100,000  
or the applicable member’s deductible, whichever was greater. In addition, the first and second  
reinsurance layers’ Reinsurer’s liability for ultimate net loss arising from General Liability including  
claims arising out of Sexual Abuse, Products Liability, Law Enforcement Liability, Public Officials  
Liability, Employment Practices Liability and Employee Benefits Liability business lines exceeding the  
retention limit but less than $1,000,000, the Pool’s annual aggregate reinsurance is limited to $40,000,000,  
for those same claims between $1,000,000 and $2,000,000, the Pool’s annual aggregate reinsurance was  
limited to $20,000,000; and for those between $2,000,000 and $5,000,000, the Pool’s annual aggregate  
reinsurance was limited to $30,000,000. Also, Reinsurer’s liability for ultimate net loss arising from  
claims between $5,000,000 and $10,000,000, the Pool’s annual aggregate reinsurance was limited to  
$50,000,000. Furthermore, with regard to ultimate net loss subject to the $8 million excess of $2 million  
reinsurance layer for Fiscal Year 2013, the Pool agreed to accept a 10% quota-share.  
Through pre-funded member assessments (deposit assessments) collected immediately prior to or at the  
beginning of each pool fiscal year, WCRP committed assets for the years ended September 30, 2017 and  
2016 of $1,083,493 and $1,008,468 respectively, and is committing for PY-2018 $1,096,921, specifically  
for funding its self-insured retentions for those years. Additional member assessments were collected as  
WCRP assets and are/were committed in support of the Pool’s “corridor deductible” exposures totaling  
$4,350,000 (PY-2017) and $3,450,000 (PY-2016).  
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Washington State Auditor's Office  
Page 24  
October 1, 2016 Thru September 30, 2017  
NOTE 4 – REINSURANCE/EXCESS INSURANCE CONTRACTS  
Through Arthur J. Gallagher Risk Management Services, Inc., the Producer (Broker-of Record) retained by  
the Pool’s Board of Directors, WCRP partners with multiple superior-rated commercial insurers by acquiring  
reinsurance agreements and “following form” excess, property, and cyber risk insurances. The limits  
provided by these insuring agreements, contracts and policies for PY-2017 follow:  
A. Memorandum of Liability Coverage (“MLC”): Since October 1, 1988, the Pool has  
provided its member counties with risk-shared (jointly purchased and/or self-insured), occurrence-  
based coverage under a MLC Coverage Form for 3rd-party liability claims against members due to  
bodily injury, personal injury, property damage, errors and omissions, and advertising injury.  
The total “occurrence” coverage grew over time to the $20 million limit that has existed since  
October 1, 2003. Note: An additional “occurrence” limit of $5 million was available for member  
counties to acquire as an individual (county-by-county) option during many of the MLC years  
including PYs 2017 and 2016. Each member annually selected a deductible amount from the  
options available, i.e. $10,000, $25,000, $50,000, $100,000, $250,000, $500,000, which was/will be  
applied to each of the member’s occurrences from that year. There were/are no aggregate limits for  
the payments the Pool made/will make for any one member county.  
The initial $10 million of MLC coverage was/is jointly self-insured. Reinsurance, subject to a self-  
insured retention (“SIR”) equal to the greater of the applicable member deductible or $100,000, was  
acquired from multiple higher-rated carriers as protection for the Pool from unexpected losses and  
for the membership from contingent liabilities that might result otherwise. Reinsurance premiums  
ceded during the year totaled $3,791,751, while the independent actuary’s estimate of the amounts  
recoverable from reinsurers (and excess insurers) which reduced the liabilities of gross loss reserves  
on the balance sheet (as of September 30, 2017,), totaled $43,697,106.  
The remaining coverage, up to $15 million, was acquired from a higher-rated commercial carrier as  
jointly-purchased “following form” excess insurance.  
B. Washington Counties Property Program (“WCPP”): Beginning with PY 2006, WCRP added  
jointly-purchased (1st-party) property coverage as an individual (county-by-county) option. This  
coverage was acquired from a consortium of higher-rated commercial carriers. During PY 2017, all  
26 WCRP counties participated in the WCPP with covered properties (in composite) exceeding $2.7  
billion.  
The WCPP limits include $500 million for typical (All Other Perils or AOP) losses, $200 million for  
catastrophe (earthquake or flood), and many sub-limited coverages including Equipment Breakdown  
/ Boiler & Machinery ($100 million) and Special Flood Hazard Areas ($25 million). Other coverages  
included Green Construction Upgrades, Reproduction for Historic Structures, and Terrorism ($20  
million).  
AOP occurrence deductibles between $5,000 and $25,000 were/are selected by the participating  
counties which they are solely responsible for paying. Higher deductibles amounts apply to  
catastrophe losses.  
C. Cyber Risk and Other Coverage: Beginning with fiscal year 2015, the Pool added jointly  
purchased cyber risk and security coverage which includes (1st party) business interruption, data  
recovery, cyber extortion, breach response and management (regulatory compliance) protections  
associated with date breaches.  
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Washington State Auditor's Office  
Page 25  
October 1, 2016 Thru September 30, 2017  
NOTE 5 – MEMBER'S SUPPLEMENTAL ASSESSMENTS AND CREDITS  
RCW 48.62.141 and the WCRP Interlocal Agreement provide for the contingent liability of participants in  
the program if assets of the program are insufficient to cover the program's liabilities. Deficits of the  
WCRP are financed through supplemental (retroactive) assessments against those counties that were  
WCRP members for the deficient period(s). During fiscal year 2017, there was no deficiency, and no  
additional retroactive assessments were levied or collected.  
NOTE 6 – CAPITAL ASSETS  
Capital assets are defined by WCRP policy as having an initial, individual cost of at least $2,500 and an  
estimated useful life in excess of one year. Capital assets are recorded at historical cost.  
Capital assets activities for the fiscal year ended September 30, 2017 were as follows:  
Beginning  
Balance  
Ending  
Balance  
10/01/2016  
Increase  
(Decrease)  
09/30/2017  
Capital Assets being  
Depreciated  
Building  
$ 1,320,950  
212,753  
$ 1,320,950  
192,608  
Furniture & Equipment  
Total Capital Assets being  
depreciated  
24,987  
(45,132)  
$ 1,533,703  
$24,987  
$(45,132)  
$ 1,513,558  
Less Accumulated  
Depreciation:  
Building  
$
392,638  
129,974  
$ 47,549  
29,045  
$ 440,187  
113,887  
Furniture & Equipment  
Total Accumulated  
Depreciation  
(45,132)  
$
522,612  
$ 76,594  
$(45,132)  
$ 554,074  
TOTAL CAPITAL  
ASSET NET  
$ 1,011,091  
$ 51,606  
$ 959,485  
Capital assets activities for the fiscal year ended September 30, 2016 were as follows:  
Beginning  
Balance  
Ending  
Balance  
10/01/2015  
Increase  
(Decrease)  
09/30/2016  
Capital Assets being  
Depreciated  
Building  
Furniture & Equipment  
$ 1,320,950  
212,753  
$ 1,320,950  
212,753  
Total Capital Assets being  
depreciated  
$ 1,533,703  
$ 1,533,703  
Less Accumulated  
Depreciation:  
Building  
$
345,089  
99,134  
$ 47,549  
30,840  
$
392,638  
129,974  
Furniture & Equipment  
Total Accumulated  
Depreciation  
$
444,223  
$ 78,389  
$
522,612  
TOTAL CAPITAL  
ASSET NET  
$ 1,089,480  
$ 78,389  
$ 1,011,091  
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Washington State Auditor's Office Page 26  
October 1, 2016 Thru September 30, 2017  
When equipment is retired or otherwise disposed of, the original cost is removed from WCRP’s capital  
assets accounts, and the net gain or loss on disposition is credited to or charged against income.  
Capital assets are depreciated using the straight-line method over the following estimated useful lives:  
Asset  
Years  
Building  
Building Improvements  
Vehicles  
30  
30  
5
Equipment  
5
NOTE 7 – SOLVENCY  
Washington Administrative Code (WAC) 200-100 requires the Washington Counties Risk Pool to maintain  
certain levels of primary and secondary assets to meet solvency standards. As defined in WAC 200-100-  
03001 total primary assets, i.e. cash and cash equivalents less non-claims liabilities, must at least equal the  
independent actuary’s expected estimate of unpaid claims. Furthermore, a pool’s total primary and  
secondary assets must at least equal the independent actuary’s 80% confidence level estimate of unpaid  
claims (70% before 2015). Secondary assets include insurance receivables, real estate or other assets less  
any non-claim liabilities, the values for which can be independently verified by the state risk manager  
Primary Asset Test 1  
Cash and cash equivalents  
Investments  
Total  
Non-claims Liabilities  
Unearned Revenues  
Total Primary Assets  
Claims Liability – Expected Level  
Test 1 Result – Primary Asset Test  
2017  
2016  
$ 10,059,410  
24,631,073  
$ 34,690,483  
861,207  
15,195,311  
$ 18,633,965  
$ 12,584,612  
PASS  
$ 4,896,133  
33,966,134  
$ 38,862,267  
304,965  
14,144,409  
$ 24,412,893  
$ 13,709,893  
PASS  
Secondary Asset Test  
Cash and cash equivalents  
Investments  
Receivables  
Prepaid Expenses  
Accrued Interest  
$ 10,059,410  
24,631,073  
11,062,095  
3,690  
$ 4,896,133  
33,966,134  
4,349,504  
2,582,677  
44,351  
51,965  
Capital Assets  
959,485  
1,011,091  
Less:  
Non-Claims Liabilities  
Unearned Revenues  
Total Secondary Assets  
Total Primary plus Secondary Assets  
$
861,207  
15,195,311  
$
304,965  
14,144,409  
$ 12,077,235  
$ 30,711,200  
$ 7,987,623  
$ 32,400,516  
Claims Liabilities at 80%  
$ 13,455,000  
$ 14,760,000  
Test 2 Results – Secondary Asset Test  
PASS  
PASS  
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Washington State Auditor's Office Page 27  
October 1, 2016 Thru September 30, 2017  
NOTE 8 – PENSION PLANS  
The following table represents the aggregate pension amounts for all plans subject to the requirements of GASB  
Statement 68, Accounting and Financial Reporting for Pensions for the years 2017 and 2016:  
Aggregate Pension Amounts – All Plans  
2017  
2016  
Pension liabilities  
$ 572,673  
$
$ 839,691  
$
Pension assets  
Deferred outflows of resources  
Deferred inflows of resources  
Pension expense/expenditures  
$ 109,958  
$ 94,174  
$ (71,073)  
$ 134,538  
$ 12,069  
$ 145,341  
State Sponsored Pension Plans  
Substantially all Washington Counties Risk Pool (WCRP) full-time and qualifying part-time employees  
participate in one of the following statewide retirement systems administered by the Washington State  
Department of Retirement Systems, under cost-sharing, multiple-employer public employee defined benefit and  
defined contribution retirement plans. The state Legislature establishes, and amends, laws pertaining to the  
creation and administration of all public retirement systems.  
The Department of Retirement Systems (DRS), a department within the primary government of the State of  
Washington, issues a publicly available comprehensive annual financial report (CAFR) that includes financial  
statements and required supplementary information for each plan. The DRS CAFR may be obtained by writing to:  
Department of Retirement Systems  
Communications Unit  
P.O. Box 48380  
Olympia, WA 98540-8380  
Or the DRS CAFR may be downloaded from the DRS website at www.drs.wa.gov.  
Public Employees’ Retirement System (PERS)  
PERS members include elected officials; state employees; employees of the Supreme, Appeals and Superior  
Courts; employees of the legislature; employees of district and municipal courts; employees of local  
governments; and higher education employees not participating in higher education retirement programs. PERS  
is comprised of three separate pension plans for membership purposes. PERS plans 1 and 2 are defined benefit  
plans, and PERS plan 3 is a defined benefit plan with a defined contribution component.  
PERS Plan 1 provides retirement, disability and death benefits. Retirement benefits are determined as two  
percent of the member’s average final compensation (AFC) times the member’s years of service. The AFC is  
the average of the member’s 24 highest consecutive service months. Members are eligible for retirement from  
active status at any age with at least 30 years of service, at age 55 with at least 25 years of service, or at age 60  
with at least five years of service. Members retiring from active status prior to the age of 65 may receive  
actuarially reduced benefits. Retirement benefits are actuarially reduced to reflect the choice of a survivor  
benefit. Other benefits include duty and non-duty disability payments, an optional cost-of-living adjustment  
(COLA), and a one-time duty-related death benefit, if found eligible by the Department of Labor and Industries.  
PERS 1 members were vested after the completion of five years of eligible service. The plan was closed to new  
entrants on September 30, 1977.  
Contributions  
The PERS Plan 1-member contribution rate is established by State statute at 6 percent. The employer  
contribution rate is developed by the Office of the State Actuary and includes an administrative expense  
component that is currently set at 0.18 percent. Each biennium, the state Pension Funding Council adopts Plan 1  
employer contribution rates. The PERS Plan 1 required contribution rates (expressed as a percentage of covered  
payroll) for 2017 were as follows:  
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October 1, 2016 Thru September 30, 2017  
PERS Plan 1  
Actual Contribution Rates:  
January – June 2017:  
PERS Plan 1  
Employer  
Employee  
6.23%  
4.77%  
0.18%  
11.18%  
6.00%  
PERS Plan 1 UAAL  
Administrative Fee  
Total  
6.00%  
July – December 2017:  
PERS Plan 1  
7.49%  
5.03%  
0.18%  
12.70%  
6.00%  
PERS Plan 1 UAAL  
Administrative Fee  
Total  
6.00%  
The WCRP’s actual contributions to the plan for fiscal years ended September 30, 2017 and 2016 were $ 38,082  
and $47,705 respectively.  
PERS Plan 2/3 provides retirement, disability and death benefits. Retirement benefits are determined as two  
percent of the member’s average final compensation (AFC) times the member’s years of service for Plan 2 and 1  
percent of AFC for Plan 3. The AFC is the average of the member’s 60 highest-paid consecutive service  
months. There is no cap on years of service credit. Members are eligible for retirement with a full benefit at 65  
with at least five years of service credit. Retirement before age 65 is considered an early retirement. PERS Plan  
2/3 members who have at least 20 years of service credit and are 55 years of age or older, are eligible for early  
retirement with a benefit that is reduced by a factor that varies according to age for each year before age 65.  
PERS Plan 2/3 members who have 30 or more years of service credit and are at least 55 years old can retire  
under one of two provisions:  
With a benefit that is reduced by three percent for each year before age 65; or  
With a benefit that has a smaller (or no) reduction (depending on age) that imposes stricter return-to-  
work rules.  
PERS Plan 2/3 members hired on or after May 1, 2013 have the option to retire early by accepting a reduction of  
five percent for each year of retirement before age 65. This option is available only to those who are age 55 or  
older and have at least 30 years of service credit. PERS Plan 2/3 retirement benefits are also actuarially reduced  
to reflect the choice of a survivor benefit. Other PERS Plan 2/3 benefits include duty and non-duty disability  
payments, a cost-of-living allowance (based on the CPI), capped at three percent annually and a one-time duty  
related death benefit, if found eligible by the Department of Labor and Industries. PERS 2 members are vested  
after completing five years of eligible service. Plan 3 members are vested in the defined benefit portion of their  
plan after ten years of service; or after five years of service if 12 months of that service are earned after age 44.  
PERS Plan 3 defined contribution benefits are totally dependent on employee contributions and investment  
earnings on those contributions. PERS Plan 3 members choose their contribution rate upon joining membership  
and have a chance to change rates upon changing employers. As established by statute, Plan 3 required defined  
contribution rates are set at a minimum of 5 percent and escalate to 15 percent with a choice of six options.  
Employers do not contribute to the defined contribution benefits. PERS Plan 3 members are immediately vested  
in the defined contribution portion of their plan.  
Contributions  
The PERS Plan 2/3 employer and employee contribution rates are developed by the Office of the State Actuary  
to fully fund Plan 2 and the defined benefit portion of Plan 3. The Plan 2/3 employer rates include a component  
to address the PERS Plan 1 UAAL and an administrative expense that is currently set at 0.18 percent. Each  
biennium, the state Pension Funding Council adopts Plan 2 employer and employee contribution rates and Plan 3  
contribution rates. The PERS Plan 2/3 required contribution rates (expressed as a percentage of covered payroll)  
for 2017 were as follows:  
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Page 29  
October 1, 2016 Thru September 30, 2017  
PERS Plan 2/3  
Actual Contribution Rates:  
Employer 2/3  
Employee 2  
January – June 2017:  
PERS Plan 2/3  
6.23%  
4.77%  
0.18%  
6.12%  
PERS Plan 1 UAAL  
Administrative Fee  
Employee PERS Plan 3  
Total  
varies  
6.12%  
11.18%  
July – December 2017:  
PERS Plan 2/3  
PERS Plan 1 UAAL  
Administrative Fee  
Employee PERS Plan 3  
Total  
7.49%  
5.03%  
0.18%  
7.38%  
varies  
7.38%  
12.70%  
The WCRP’s actual contributions to the plan for years ended September 30, 2017 and 2016 were $51,177 and  
$44,017 respectively.  
Actuarial Assumptions  
The total pension liability (TPL) for each of the DRS plans was determined using the most recent actuarial  
valuation completed in 2017 with a valuation date of June 30, 2016. The actuarial assumptions used in the  
valuation were based on the results of the Office of the State Actuary’s (OSA) 2007-2012 Experience Study and  
the 2015 Economic Experience Study.  
Additional assumptions for subsequent events and law changes are current as of the 2016 actuarial valuation  
report. The TPL was calculated as of the valuation date and rolled forward to the measurement date of June 30,  
2017. Plan liabilities were rolled forward from June 30, 2016, to June 30, 2017, reflecting each plan’s normal  
cost (using the entry-age cost method), assumed interest and actual benefit payments.  
Inflation: 3% total economic inflation; 3.75% salary inflation  
Salary increases: In addition to the base 3.75% salary inflation assumption, salaries are also expected  
to grow by promotions and longevity.  
Investment rate of return: 7.5%  
Mortality rates were based on the RP-2000 report’s Combined Healthy Table and Combined Disabled Table,  
published by the Society of Actuaries. OSA applied offsets to the base table and recognized future  
improvements in mortality by projecting the mortality rates using 100% Scale BB. Mortality rates are applied on  
a generational basis; meaning, each member is assumed to receive additional mortality improvements in each  
future year throughout his or her lifetime.  
There were minor changes in methods and assumptions since the last valuation.  
For all plans except LEOFF Plan 1, how terminated and vested member benefits are valued was corrected.  
How the basic minimum COLA in PERS Plan 1 is valued for legal order payees was improved.  
For all plans, the average expected remaining service lives calculation was revised  
Discount Rate  
The discount rate used to measure the total pension liability for all DRS plans was 7.5%.  
To determine that rate, an asset sufficiency test included an assumed 7.7% long-term discount rate to determine  
funding liabilities for calculating future contribution rate requirements. (All plans use 7.7% except LEOFF 2,  
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October 1, 2016 Thru September 30, 2017  
which has assumed 7.5%). Consistent with the long-term expected rate of return, a 7.5% future investment rate  
of return on invested assets was assumed for the test. Contributions from plan members and employers are  
assumed to continue being made at contractually required rates (including PERS 2/3, PSERS 2, SERS 2/3, and  
TRS 2/3 employers, whose rates include a component for the PERS 1, and TRS 1 plan liabilities). Based on  
these assumptions, the pension plans’ fiduciary net position was projected to be available to make all projected  
future benefit payments of current plan members. Therefore, the long-term expected rate of return of 7.5% was  
used to determine the total liability.  
Long-Term Expected Rate of Return  
The long-term expected rate of return on DRS pension plan investments of 7.5% was determined using a  
building-block-method. The Washington State Investment Board (WSIB) used a best estimate of expected future  
rates of return (expected returns, net of pension plan investment expense, including inflation) to develop each  
major asset class. Those expected returns make up one component of WSIB’s capital market assumptions.  
WSIB uses the capital market assumptions and their target asset allocation to simulate future investment returns  
at various future times. The long-term expected rate of return of 7.5% approximately equals the median of the  
simulated investment returns over a 50-year time horizon.  
Estimated Rates of Return by Asset Class  
Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target  
asset allocation as of June 30, 2017, are summarized in the table below. The inflation component used to create  
the table is 2.2% and represents WSIB’s most recent long-term estimate of broad economic inflation.  
Asset Class  
Target Allocation  
% Long-term  
Expected Real Rate of  
Return Arithmetic  
1.70%  
4.40%  
5.80%  
Fixed Income  
Tangible Assets  
Real Estate  
Global Equity  
Private Equity  
20%  
5%  
15%  
37%  
23%  
100%  
6.30%  
9.30%  
Sensitivity of Net Pension Liability (NPL)  
The table below presents the Washington Counties Risk Pool’s proportionate share* of the net pension liability  
calculated using the discount rate of 7.5%, as well as what the Washington Counties Risk Pool’s proportionate  
share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage point  
lower (6.5%) or 1-percentage point higher (8.5%) than the current rate.  
1% Decrease  
(6.5%)  
Current Rate  
(7.5%)  
1% Increase  
(8.5%)  
2017  
PERS 1  
PERS 2/3  
$ 359,310  
748,203  
$ 294,954  
277,719  
$ 239,208  
(107,774)  
1% Decrease  
(6.5%)  
Current Rate  
(7.5%)  
1% Increase  
(8.5%)  
2016  
PERS 1  
PERS 2/3  
$ 571,723  
673,109  
$ 474,105  
365,586  
$ 390,099  
(109,308)  
Pension Plan Fiduciary Net Position  
Detailed information about the State’s pension plans’ fiduciary net position is available in the separately issued  
DRS financial report.  
Pension Liabilities (Assets), Pension Expense, and Deferred Outflows of Resources and Deferred Inflows  
of Resources Related to Pensions.  
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Washington State Auditor's Office  
Page 31  
October 1, 2016 Thru September 30, 2017  
At June 30, 2017 and 2016, the Washington Counties Risk Pool reported a total pension liability of $572,674 and  
$839,691 respectively for its proportionate share of the net pension liabilities as follows:  
Liability (or Asset)  
Liability (or Asset)  
2017  
2016  
PERS 1  
PERS 2/3  
$294,955  
$277,719  
$474,105  
$365,586  
At June 30, 2017 and 2016, the Washington Counties Risk Pool’s proportionate share of the collective net  
pension liabilities was as follows:  
Proportionate  
Share 6/30/16  
Proportionate  
Share 6/30/17  
Change in  
Proportion  
PERS 1  
PERS 2/3  
.008828%  
.007261%  
.006216%  
.007993%  
(.002612) %  
. 000732%  
Proportionate  
Share 6/30/15  
Proportionate  
Share 6/30/16  
Change in  
Proportion  
PERS 1  
PERS 2/3  
.007815%  
.006456%  
.008828%  
.007261%  
.001013%  
.000805%  
Employer contribution transmittals received and processed by DRS for the fiscal year ended June 30 are used as  
the basis for determining each employer’s proportionate share of the collective pension amounts reported by  
DRS in the Schedules of Employer and Nonemployer Allocations for all plans except LEOFF 1.  
The collective net pension liability (asset) was measured as of June 30, 2017, and the actuarial valuation date on  
which the total pension liability (asset) is based was as of June 30, 2016, with update procedures used to roll  
forward the total pension liability to the measurement date.  
Pension Expense  
For the year ended September 30, 2017 and 2016, the Washington Counties Risk Pool recognized pension  
expense as follows:  
Pension Expense  
2017  
Pension Expense  
2016  
PERS 1  
$ (122,133)  
$ 81,069  
PERS 2/3  
TOTAL  
$ 51,060  
$ 64,272  
$145,341  
$ (71,073)  
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Washington State Auditor's Office Page 32  
October 1, 2016 Thru September 30, 2017  
Deferred Outflows of Resources and Deferred Inflows of Resources  
At September 30, 2017, the Washington Counties Risk Pool reported deferred outflows of resources and deferred  
inflows of resources related to pensions from the following sources:  
PERS 1  
Deferred Outflows of  
Deferred Inflows of  
Resources  
Resources  
Differences between expected and  
actual experience  
$
$
Net difference between projected  
and actual investment earnings on  
pension plan investments  
$
$ (11,007)  
Changes of assumptions  
$
$
$
$
Changes in proportion and  
differences between contributions  
and proportionate share of  
contributions  
Contributions subsequent to the  
measurement date  
$ 11,005  
$ 11,005  
TOTAL  
$ (11,007)  
PERS 2/3  
Deferred Outflows of  
Resources  
Deferred Inflows of  
Resources  
Differences between expected and  
actual experience  
$ 28,139  
$ (9,134)  
Net difference between projected  
and actual investment earnings on  
pension plan investments  
$ 0  
$ (74,033)  
Changes of assumptions  
$ 2,950  
$52,037  
$
$
Changes in proportion and  
differences between contributions  
and proportionate share of  
contributions  
Contributions subsequent to the  
measurement date  
$ 15,826  
$ 98,953  
TOTAL  
$ (83,167)  
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Washington State Auditor's Office Page 33  
October 1, 2016 Thru September 30, 2017  
At September 30, 2016, the Washington Counties Risk Pool reported deferred outflows of resources and deferred  
inflows of resources related to pensions from the following sources:  
Deferred Outflows of  
Deferred Inflows of  
PERS 1  
Resources  
Resources  
Differences between expected and  
actual experience  
$
$
Net difference between projected and  
actual investment earnings on pension  
plan investments  
$ 11,937  
$
Changes of assumptions  
$
$
$
$
Changes in proportion and  
differences between contributions and  
proportionate share of contributions  
Contributions subsequent to the  
measurement date  
$ 6,997  
TOTAL  
$ 18,934  
$
Deferred Outflows of  
Resources  
Deferred Inflows of  
Resources  
PERS 2/3  
Differences between expected and  
actual experience  
$ 19,467  
$ (12,069)  
Net difference between projected and  
actual investment earnings on pension  
plan investments  
$ 44,737  
$
Changes of assumptions  
$ 3,779  
$38,482  
$
$
Changes in proportion and  
differences between contributions and  
proportionate share of contributions  
Contributions subsequent to the  
measurement date  
$ 9,138  
TOTAL  
$ 115,604  
$ (12,069)  
Deferred outflows of resources related to pensions resulting from the Washington Counties Risk Pool’s  
contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in  
the year ended September 30, 2017. Other amounts reported as deferred outflows and deferred inflows of  
resources related to pensions will be recognized in pension expense as follows:  
Year ended  
September:  
2018  
PERS 1  
PERS 2/3  
$ (7,440)  
$ 2,349  
$ (11,833)  
$ 22,273  
2019  
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Washington State Auditor's Office Page 34  
October 1, 2016 Thru September 30, 2017  
2020  
$ (545)  
$
(572)  
2021  
$ (5,370)  
$ (25,500)  
2022  
Thereafter  
TOTAL  
$
$
$
6,779  
8,812  
(40)  
$ (11,007)  
Deferred outflows of resources related to pensions resulting from the Washington Counties Risk Pool’s  
contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in  
the year ended September 30, 2016. Other amounts reported as deferred outflows and deferred inflows of  
resources related to pensions will be recognized in pension expense as follows:  
Year ended  
September:  
2017  
2018  
2019  
PERS 1  
PERS 2/3  
$ (2,939)  
$ (2,939)  
$ 10,963  
$ 13,641  
$ 13,641  
$ 44,324  
$ 22,790  
2020  
$ 6,853  
Thereafter  
$
TOTAL $11,937  
$ 94,396  
NOTE 9 – QUALIFIED PENSION PLAN  
The WCRP also participates in a defined contribution pension plan created in accordance with Internal Revenue  
Code Section 401(a). This plan is with the International City/County Management Association (ICMA).  
Employer contributions to the Qualified Pension Plan for the years ended September 30, 2017 and 2016 were  
$50,388 and $52,079, respectively. There are no employee contributions to this plan.  
NOTE 10 – DEFERRED COMPENSATION PLANS  
The WCRP offers its employees a choice of two deferred compensation plans created in accordance with  
Section 457 of the Internal Revenue Code. The plans are with the International City/County Management  
Association (ICMA) and the Washington State Department of Retirement. The plans, available to all  
eligible employees, permit them to defer a portion of their wages until future years. The deferred  
compensation is not available to contributing employees until their termination, retirement, death, or  
unforeseeable emergency.  
In 1998, the ICMA Deferred Compensation Program plans’ assets were placed into trust for the exclusive  
benefit of participants and their beneficiaries. Pursuant to Governmental Accounting Standards Board  
(GASB) Statement 32, and since the WCRP is no longer the owner of these assets, these plans’ assets and  
liabilities are no longer reported in the WCRP financial statements.  
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Washington State Auditor's Office  
Page 35  
October 1, 2016 Thru September 30, 2017  
NOTE 11 – LONG TERM LIABILITIES  
During the year ended September 30, 2017, the following changes occurred in long-term liabilities:  
Beginning  
Balance  
9/30/2016  
Ending  
Balance  
9/30/2017  
Due Within  
One Year  
Changes in Long -Term Liabilities  
Additions  
Reductions  
Claims Reserves  
Corridor Reserves  
Quota Share  
$ 2,044,867  
5,109,746  
120,000  
$ (184,930)  
(20,000)  
$ 1,859,937  
6,625,933  
100,000  
$
767,879  
2,001,585  
1,516,187  
ULAE Reserve  
1,116,000  
85,660  
839,692  
107,328  
1,223,328  
68,795  
572,674  
Compensated Absences  
Net Pension Liability – GASB 68  
Total Long-Term Liabilities  
(16,865)  
(267,018)  
$ (488,813)  
7,000  
$ 9,315,965 $ 1,623,515  
$ 10,450,667  
$ 2,776,464  
___________________________________________________________________________________________________________________  
Washington State Auditor's Office Page 36  
October 1, 2016 Thru September 30, 2017  
NOTE 12 – UNPAID CLAIMS LIABILITIES  
As discussed somewhat in Notes C.6 and C.9, WCRP establishes a liability for both reported and unreported  
insured events that include estimates of both future payments of losses and related claims adjustment expenses.  
The following represents comparative changes in those aggregate liabilities for WCRP’s SIR Reserves,  
reinsurance’ Corridor Deductibles, and Quota Share during the past two years:  
2017  
2016  
$
3,222,484  
$ 2,779,907  
SIR - Unpaid claims and claim adjustment expense/claims reserve at beginning of the year  
SIR - Incurred Claims & Claims Adjustment Expenses:  
Provisions for Insured Events of the Current Year  
1,083,493  
13,889  
1,008,468  
575,252  
Increase (Decrease) in Provision for Insured Events Prior Years  
SIR - Total Incurred Claims & Claims Adjustment Expense  
SIR - Payments:  
$
4,319,866  
$
4,363,627  
Claims & Claims Adjustment Expenses Attributable to Insured Events of the Current Year  
Claims & Claims Adjustment Expenses Attributable to Insured Events of Prior Years  
$
66,775  
$
0.00  
1,625,279  
1,141,147  
SIR -Total Payments  
$
1,692,054  
$
1,141,147  
SIR - Total Unpaid Claims & Claims Expense Reserves at End of Year  
$
2,627,813  
$
3,222,484  
$
9,251,412 $ 11,421,337  
Corridor - Unpaid claims and claim adjustment expense/claims reserve at beginning of the year  
Corridor – Incurred Claims & Claims Adjustment Expenses:  
Provisions for Insured Events of the Current Year  
$
4,350,000  
(329,529)  
$ 3,450,000  
(507,141)  
Increase (Decrease) in Provision for Insured Events Prior Years  
$ 13,271,883 $ 14,364,196  
Corridor - Total Incurred Claims & Claims Adjustment Expense  
Corridor – Payments:  
Claims & Claims Adjustment Expenses Attributable to Insured Events of the Current Year  
Claims & Claims Adjustment Expenses Attributable to Insured Events of Prior Years  
$0.00  
$0.00  
$ 4,644,361  
$
5,112,774  
$ 4,644,361  
$
$
$
1,609,560  
9,251,412  
240,000  
Corridor – Payments  
Corridor - Total Unpaid Claims & Claims Expense Reserves at End of Year  
Quota Share 10% – Unpaid claims and claim adjustment expense/claims reserve at beginning of the year  
$ 8,627,522  
$
120,000  
Quota Share 10% – Incurred Claims & Claims Adjustment Expenses:  
Provisions for Insured Events of the Current Year  
Increase (Decrease) in Provision for Insured Events Prior Years  
Quota Share - Total Incurred Claims & Claims Adjustment Expense  
Quota Share - Payments:  
$
(20,000)  
$
$
(120,000)  
(120,000)  
$
(20,000)  
Quota Share - Total Unpaid Claims & Claims Expense Reserves at End of Year  
$100,000  
$
120,000  
Grand Total all Coverages (SIR, Corridor, Quota Share 10%) at year end  
Unallocated Loss Adjustment expense (ULAE) at year end  
$ 11,355,331 $ 12,593,893  
1,223,328 1,116,000  
$ 12,578,659 $ 13,709,893  
$
$
Total Claims Reserve at Year End  
The actuary estimated the current SIR Unpaid Claims and Claims Adjustment liability at the end of PY  
2017 and PY 2016 to be $767,909 and $1,177,614 respectively.  
The actuary estimated the – Total Unpaid Claims and Claims Adjustment Liability at the end of 2017 and  
2016 to be $2,770,000 and $5,319,280 respectively.  
___________________________________________________________________________________________________________________  
Washington State Auditor's Office  
Page 37  
REQUIRED SUPPLEMENTARY INFORMATION  
Washington Counties Risk Pool  
Schedule of Proportionate Share of the Net Pension Liability  
PERS 1  
As of June 30  
Last 3 Fiscal Years  
2015  
2016  
2017  
Employer's proportion of the net pension liability  
(asset)  
0.007815%  
408,797  
408,797  
716,208  
0.008828%  
474,105  
474,105  
807,402  
0.006216%  
294,954  
294,954  
760,179  
Employer's proportionate share of the net pension  
liability  
TOTAL  
Covered Payroll  
Employer's proportionate share of the net pension  
liability as a percentage of covered employee payroll  
Plan fiduciary net position as a percentage of the total  
pension liability  
57.08%  
59.10%  
58.72%  
57.03%  
38.80%  
61.24%  
Washington Counties Risk Pool  
Schedule of Proportionate Share of the Net Pension Liability  
PERS 2/3  
As of June 30  
Last 3 Fiscal Years  
2015  
2016  
2017  
Employer's proportion of the net pension liability  
(asset)  
0.006456%  
230,677  
230,677  
572,850  
0.007261%  
365,586  
365,586  
644,146  
0.007993%  
277,719  
277,719  
760,179  
Employer's proportionate share of the net pension  
liability  
TOTAL  
Covered Payroll  
Employer's proportionate share of the net pension  
liability as a percentage of covered employee payroll  
Plan fiduciary net position as a percentage of the total  
pension liability  
40.27%  
89.20%  
56.76%  
85.82%  
36.53%  
90.97%  
___________________________________________________________________________________________________________________  
Washington State Auditor's Office Page 38  
REQUIRED SUPPLEMENTARY INFORMATION  
Washington Counties Risk Pool  
Schedule of Employer Contributions  
PERS 1  
As of September 30  
Last 3 Fiscal Years  
2015  
2016  
2017  
Statutorily or contractually required contributions  
Contributions in relation to the statutorily or  
38,174  
47,705  
38,082  
contractually required contributions  
Contribution deficiency (excess)  
38,174  
0
47,705  
0
38,082  
0
Covered Payroll  
728,221 803,177 775,769  
Contributions as a percentage of covered employee  
payroll  
5.24%  
5.94%  
4.91%  
Washington Counties Risk Pool  
Schedule of Employer Contributions  
PERS 2/3  
As of September 30  
Last 3 Fiscal Years  
2015  
2016  
2017  
Statutorily or contractually required contributions  
Contributions in relation to the statutorily or  
31,045  
44,017  
51,177  
contractually required contributions  
Contribution deficiency (excess)  
31,045  
0
44,017  
0
51,177  
0
Covered Payroll  
Contributions as a percentage of covered employee  
payroll  
584,437 675,866 775,766  
5.31% 6.51% 6.60%  
___________________________________________________________________________________________________________________  
Washington State Auditor's Office Page 39  
___________________________________________________________________________________________________________________  
Washington State Auditor's Office Page 40  
October 1, 2016 Thru September 30, 2017  
REQUIRED SUPPLEMENTARY INFORMATION  
This required supplementary information is an integral part of the accompanying financial statements.  
1.  
Ten-Year Claims Development Information  
The table below illustrates how the WCRP earned revenues (net of reinsurance) and investment  
income compare to related costs of loss (net of loss assumed by reinsurers) and other expenses  
assumed by the WCRP as of the end of each of the last ten years. The rows of the table are  
defined as follows:  
a. This line shows the total of each fiscal year gross earned contribution revenue and investment revenue,  
contribution revenue ceded to reinsurers, and net earned contribution revenue and reported investment  
revenue.  
b. This line shows each fiscal year's other operating costs of the WCRP including overhead and claims  
expense not allocable to individual claims.  
c. This line shows the WCRP gross incurred claims and allocated claims adjustment expenses, claims  
assumed by reinsurers, and net incurred claims and allocated adjustment expenses (both paid and  
accrued) as originally reported at the end of the first year in which the event that triggered coverage  
under the contract occurred (called policy year).  
d. This section of ten rows shows the cumulative net amounts paid as of the end of successive years for  
each policy year.  
e. This line shows the latest estimated amount of claims assumed by reinsurers as of the end of the  
current year for each accident year.  
f.  
This section of ten rows show how each year’s net incurred claims increased or decreased as of the end  
of successive years. (This annual estimation results from new information received on known claims,  
reevaluation of existing information on known claims, as well as emergence of new claims not  
previously known.)  
g. This line compares the latest estimated net incurred claims amount to the amount originally established  
(line 3) and shows whether this latest estimate of net claims cost is greater or less than originally  
thought. As data for individual policy years mature, the correlation between original estimates and  
estimated amounts is commonly used to evaluate the accuracy of net incurred claims currently  
recognized in less mature policy years. The columns of the table show data for successive policy  
years.  
2.  
Reconciliation of Claims Liabilities by Type of Contract  
The schedule presented in Note 14 presents the changes in claims liabilities for the past two years  
for the WCRP’s one type of contract, liability insurance.  
___________________________________________________________________________________________________________________  
Washington State Auditor's Office Page 41  
October 1, 2016 Thru September 30, 2017  
LIST OF PARTICIPATING MEMBERS  
Schedule T-1  
The following is a list of WCRP membership during the fiscal year 2016-2017  
Adams County  
Benton County  
Chelan County  
Clallam County  
Columbia County  
Cowlitz County  
Douglas County  
Franklin County  
Garfield County  
Grays Harbor County  
Island County  
Lewis County  
Mason County  
Okanogan County  
Pacific County  
Pend Oreille County  
San Juan County  
Skagit County  
Skamania County  
Spokane County  
Thurston County  
Walla Walla County  
Whatcom County  
Yakima County  
Jefferson County  
Kittitas County  
___________________________________________________________________________________________________________________  
Washington State Auditor's Office Page 42  
WASHINGTON COUNTIES RISK POOL  
DES Schedule of Expenses  
Schedule T-2  
MCAG NO. 0774  
For Fiscal Years Ended September 30, 2017 and September 30, 2016  
09/30/2017  
09/30/2016  
Insurance Premiums/Reserve Expense  
ULAE Expense  
$12,567,269  
107,328  
$10,976,554  
129,548  
Adjustment to Prior Years' "1st/2nd Layers' Corridor" Reserves  
Adjustment to Prior Years' "SIR" Reserves  
Adjustment to Prior Year' "10% (8x2 Layer) Quota Share  
(329,529)  
13,889  
(20,000)  
(507,141)  
575,252  
(120,000)  
Contracted Services:  
Actuarial  
State Audit Expense  
State Risk Manager Expenses  
Legal Fees  
176,419  
11,160  
11,720  
358,541  
28,188  
110,400  
11,021  
11,734  
1,743,433  
18,847  
IT Consultants  
Property Appraiser  
63,163  
Investment Advisor  
12,813  
15,731  
8,808  
12,000  
3,547  
Consulting Member Services Manager  
Leadership Search Consultant  
Other Consulting Fees  
3,984  
General Administrative Expenses  
Employee Salaries and Benefits  
Communication  
Supplies  
Dues and Memberships  
Travel - Employee  
Committee and Board Meetings  
Depreciation  
Building and Auto Insurance  
Operating Leases  
Utilities/Building Maintence  
Member Services - Training  
Member Services - Grants/Scholarships  
Miscellaneous Expenses  
912,489  
15,666  
23,757  
7,361  
74,194  
111,403  
76,593  
18,300  
60,978  
46,829  
152,784  
18,258  
20,150  
1,221,221  
15,295  
24,021  
8,087  
92,366  
91,692  
78,389  
22,726  
102,115  
17,972  
99,929  
55,874  
17,739  
Total Operating Expenses  
$14,492,291  
$14,888,576  
___________________________________________________________________________________________________________________  
Washington State Auditor's Office Page 43  
ABOUT THE STATE AUDITOR’S OFFICE  
The State Auditor's Office is established in the state's Constitution and is part of the executive  
branch of state government. The State Auditor is elected by the citizens of Washington and serves  
four-year terms.  
We work with our audit clients and citizens to achieve our vision of government that works for  
citizens, by helping governments work better, cost less, deliver higher value, and earn greater  
public trust.  
In fulfilling our mission to hold state and local governments accountable for the use of public  
resources, we also hold ourselves accountable by continually improving our audit quality and  
operational efficiency and developing highly engaged and committed employees.  
As an elected agency, the State Auditor's Office has the independence necessary to objectively  
perform audits and investigations. Our audits are designed to comply with professional standards  
as well as to satisfy the requirements of federal, state, and local laws.  
Our audits look at financial information and compliance with state, federal and local laws on the  
part of all local governments, including schools, and all state agencies, including institutions of  
higher education. In addition, we conduct performance audits of state agencies and local  
governments as well as fraud, state whistleblower and citizen hotline investigations.  
The results of our work are widely distributed through a variety of reports, which are available on  
our website and through our free, electronic subscription service.  
We take our role as partners in accountability seriously, and provide training and technical  
assistance to governments, and have an extensive quality assurance program.  
Contact information for the State Auditor’s Office  
PublicRecords@sao.wa.gov  
(360) 902-0370  
Public Records requests  
Main telephone  
(866) 902-3900  
Toll-free Citizen Hotline  
Website  
www.sao.wa.gov  
___________________________________________________________________________________________________________________  
Washington State Auditor's Office Page 44